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Andrea O'Sullivan

Articles by Andrea O'Sullivan

The 12 Economists of Christmas: Elinor Ostrom

January 8, 2020

The Christmas tree is one of the most enduring symbols of the holiday season. It’s noteworthy that this tradition has lasted for so long, particularly when you consider the resource constraints that could have imperiled its future.
When resources are shared communally, things like fish in a lake or lush forests of Douglas firs can quickly become depleted. That’s because it’s often difficult to control or limit others’ use of the resource, which leads to a “race to bottom” as everyone tries to get his or her fair share before the resource is completely exhausted.
Traditionally, economists deem this issue a “tragedy of the commons.” The interests of private actors and the public good are pitted against each other, as every individual fisher, trapper, or lumberjack has an incentive to gather

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The 12 Economists of Christmas: Alfred E. Kahn

December 23, 2019

Several of our “Twelve Economists of Christmas” are by now household names. Many people are familiar with the work of well-known intellectuals like Milton and Rose Friedman, Friedrich Hayek, and Adam Smith. Fewer people have heard the name of today’s economist of Christmas, Alfred E. Kahn, but his life’s work has perhaps had more of an impact on our everyday lives than anyone on this list.
Today, so many of us hop on a flight to get home for the holidays that we don’t think much about how different air travel was as recently as the late 1970s. Indeed, at one point, flying was a luxury reserved largely for the well-to-do and business travelers. The idea of taking a flight across the country to be with loved ones for the Christmas season was simply unimaginable for most people.
The problem

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New Research on Development Subsidies, Labor Force Attachment, Occupational Licensing, and Regulatory Analysis

November 25, 2019

The Economics of a Targeted Economic Development Subsidy
Matthew Mitchell, Michael Farren, Olivia Gonzalez, and Jeremy Horpedahl | Research Paper
In an effort to spur economic growth and to burnish their job-creation bona fides, policymakers at the federal, state, and local levels often dispense targeted economic development subsidies. These selective incentives include targeted tax relief, targeted regulatory relief, cash subsidies, and in-kind donations of land and other valuable goods and services. The weight of economic theory suggests that these subsidies do not work and may even depress economic activity. In this paper, we review the economic case for and against targeted economic development subsidies, using Wisconsin’s $1.2 billion to $3.6 billion subsidy to Foxconn to illustrate

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How to Get Our Dumb Infrastructure Ready for Smart Cars (and More)

October 30, 2019

Many are understandably fascinated by the promise of driverless cars. Much attention is paid to smart car software, and experts were long fond of debating whether such applications were even technically possible. As more driverless car ventures put out fully autonomous test pilot vehicles on real roads, the debate over whether cars can theoretically drive themselves is resolving.
But all this time, fewer thought to ask: can our roads stand up to the challenge?
While heady debates about the feasibility of “strong artificial intelligence” command public attention, behind the scenes, a group of policymakers have been anticipating the need to update our infrastructure to accommodate the next wave of transportation innovation.
In fact, autonomous vehicles are not the only technology that needs

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A Closer Look at Recent Hawaiian Housing Supply Growth

October 22, 2019

Last week, we took a look at housing supply growth on the Hawaiian island of Oahu from 2012 to 2018. At first glance, the supply of residences on Hawaii’s most populated island appeared to grow robustly. But when compared to similarly-situated neighborhoods in other parts of the country, it appears that Oahu’s housing supply is unfortunately falling behind.
This week, Mercatus senior research fellow Salim Furth plotted the data on housing supply in the remaining Hawaiian islands from 2012 to 2018. The data can be viewed on Chart 1 below, and are also available as a dynamic map on Datawrapper.

Again, the data at first appear positive. First, it should be noted that there is not much data to begin with. Many of the census tracts had so few residential addresses that they do not register on

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New Research on Innovation, Immigration, Antitrust and Data, and State and Local Business Subsidies

October 21, 2019

Innovation Unbound
Arthur Diamond | Policy Brief
Inventors and entrepreneurs are key drivers of innovations that result in improvement in human welfare. Peter Thiel and Tyler Cowen worry that in recent decades, except in information technology, innovation has been sparse. Thiel suggests the sparseness will end when entrepreneurs and potential entrepreneurs show more courage. Cowen suggests that the sparseness will end when the stock of entrepreneurial opportunities is replenished (since at present all the low-hanging fruit has been picked). Contra Cowen, Arthur Diamond believes we do not need to wait for the low-hanging fruit to grow back; plenty of opportunities can be created by innovative entrepreneurs right now—if society lets them. In this new policy brief, Diamond blames the sparsity

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Housing Supply Growth in Hawaii’s Oahu Island Is Not Exactly Blossoming

October 16, 2019

Hawaii’s island of Oahu is one of the most stunning escapes in the country. Despite the high cost of living in America’s Polynesian islands, for many, the state’s natural beauty and tropical state of mind more than make up for such monetary demands.
Mercatus senior research fellow Salim Furth recently dug into the data on housing supply in the Hawaiian island of Oahu, the third largest and most populated of the chain, from 2012 to 2018. The data can be viewed on Chart 1 below, and is also available as a dynamic map on Datawrapper.

At first blush, the data may look rather encouraging. A few areas did shrink in terms of housing stock, but a good number of them did grow, and many areas saw little change either way. Right away, it should be noted that most Oahuans live in the small census

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New Research on Paying Interest on Bank Reserves and Foreign Aid

September 16, 2019

Should the Fed Pay Interest on Bank Reserves?
Scott Sumner | Policy Brief
For the first 95 years of its existence, the Federal Reserve (Fed) did not pay any interest on money that commercial banks deposited at the Fed. These deposits at the Fed, which are considered bank reserves, were treated no differently from reserves held as vault cash, which also earned no interest. Then, on October 8, 2008, the Fed suddenly began paying interest on reserves (IOR) deposited at the Fed.
While the decision to pay IOR was not particularly controversial at the time (other central banks had been doing this for years), it radically changed the nature of US monetary policy. The lack of controversy may have partially reflected confusion over the nature of monetary policy before 2008. Hasn’t the Fed always

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What are “Development Dividends,” and Could They Stimulate New Housing Stock?

September 13, 2019

The “collective action problem” is an omnipresent dilemma in public policy. Many bad laws get or stay on the books because of the uneven way that benefits and costs are dispersed among society.
Often, a small and engaged group will enjoy the lion’s share of the perks of a bad policy. Such windfalls give them a strong incentive to mobilize and protect their benefits from pesky reformers. The costs, meanwhile, are usually dispersed across a large swath of society.
On net, the costs far outweigh the benefits. But since the cost to each individual is only a few dollars a year, it just doesn’t make sense for them to take the time to attend public hearings and lobby their representatives to roll back the bad policy. So socially detrimental policies often have an unfortunate stickiness to them.

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New Research on the Economic Situation and Externalities

September 9, 2019

The Economic Situation, September 2019
Bruce Yandle, Patrick McLaughlin, and Stephen Strosko | Policy Brief
This Economic Situation report begins with a discussion of the world economy and then focuses on the United States. Examination of data in both cases leaves little doubt that the days of better-than-three-percent sustained real GDP growth are in America’s past, at least for the next few years. The discussion of the US economy also pays attention to what is happening across the 50 states. President Trump’s use of tariffs and trade wars as instruments for achieving political goals is the focus of the report’s second section.
Turning to crazy season policy proposals, the report then addresses two proposals that, though rather extreme, may survive, depending, of course, on the 2020

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New Research on California Zoning, Monetary Policy, Telehealth, Universal Service Fund Caps, and Regulation Snapshots

September 3, 2019

Last week saw the publication of several new Mercatus research products. The titles and summaries are presented below.
California Zoning: Housing Construction and a New Ranking of Local Land Use Regulation
Salim Furth and Olivia Gonzalez | Mercatus Research
California’s statewide housing crunch is not news. Academics, journalists, and political leaders have increasingly focused on strict regulation of housing supply as the culprit behind the state’s high and rising rent and home prices. Although California has many statewide rules affecting housing construction, zoning restrictions are enacted by city and county governments. In “California Zoning: Housing Construction and a New Ranking of Local Land Use Regulation,” Salim Furth and Olivia Gonzalez develop an index of regulatory stringency

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Congressional Libra Hearings Show It’s Tough to Innovate on Compliance

July 18, 2019

Facebook made waves with its recent announcement that it plans to launch a digital currency system called Libra. The proposed payment system combines features of centralized service providers and federated blockchain-like value transfer to bring more people into the digital financial fold (and hopefully keep them on Facebook in the process). 
The social media giant has teamed up with dozens of founding “Libra Association” partners, including Visa, Uber, and Andreessen Horowitz, to build the Libra network, which is slated to launch in 2020.
While the system is as yet merely an idea, the regulatory interest it has generated is real and substantial. Libra project lead David Marcus faced two tough days of congressional scrutiny where he was grilled on topics like privacy, anti-money laundering

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Section 230 Isn’t an Aberration, It’s a Distillation of Common Law Trends

July 16, 2019

Is platform liability protection a gross exception to American publishing standards? Opponents of a rule called Section 230, which protects online intermediaries from expensive lawsuits over certain kinds of user-submitted content, say so. They argue that websites are shielded by the rule from legal risks in ways that other editorial broadcasters are not. 

To restore sanity and fairness to publishing norms, online liability protections must be overhauled, critics maintain. Antagonism to Section 230 has moved beyond rhetoric, with Sen. Josh Hawley (R-MO) proposing a bill that would remove platform liability shields  from “non-neutral” services. Websites would need to earn their liability protection by curating content in a government-approved manner.
New research by Mercatus scholars Brent

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This May Day, Let’s Liberate Workers

May 1, 2019

Whether you’re celebrating the ancient European Spring festival or fighting for international workers’ rights today, there is a pro-labor reform that everyone can get behind on May Day: removing barriers to employment for workers across the country.
One of the most pernicious and unjustifiable barriers is occupational licensure for low-risk employment. Different states have different rules, but in every case, the practice of occupational licensure imposes burdens on workers seeking to earn a living. Whether they involve fees, costly classes, questionable testing, or all of the above, occupational licensing requirements can mean the difference between gainful employment and life on the legal fringes.
Occupational licensure regulates a huge swath of the working population. Most people are

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Mark Zuckerberg Confirms: Regulation Would Be Good for Facebook

April 10, 2019

After a year of scandal and criticism, Facebook is now calling for regulations on internet companies. CEO Mark Zuckerberg penned an op-ed in the Washington Post outlining four areas for lawmakers to target: speech controls, online political activity, data privacy, and data portability.
Has Facebook suddenly seen the light, as some observers hope, or is this pivot a classic case of regulatory capture?
I’ve pointed out before why regulation would be in Facebook’s interest. Although the company opposed measures like the EU’s General Data Protection Regulation (GDPR), it ended up benefitting from the rules because smaller competitors can’t shoulder compliance costs like well-lawyered Facebook can.
New regulations would likely also redound to Facebook’s benefit, especially if lawmakers take up

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How to Promote Data Privacy While Protecting Innovation

February 13, 2019

Our digital age spawns marvels and mayhem. The considerable number of news stories extolling a cool new gadget or online service may only slightly outpace the number of aghast exposés on data privacy issues.
Genetic testing services provide a timely case in point.
It’s hard to turn on a screen these days without seeing an advertisement for an at-home heritage and health analysis of your DNA. 23andme, a pioneer in these services, recently fine-tuned its ethnicity estimates to more specific regions, allowing even more insight into our ancestries.
Private genetic testing services are not without their dark side. Earlier this month, FamilyTreeDNA admitted to its customers that the company had been sharing DNA data with law enforcement without user permission. Police have been able to use

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Curbing Urban Growth Boundaries to Connect Town and Country

February 5, 2019

This is the third installment in a multi-part series identifying policy reform opportunities that could improve the quality of life for rural Americans.
Despite the name, “urban” planning policies can have large impacts on rural communities. Unfortunately, this influence is often negative. Policymakers seeking ways to help remote constituencies should, therefore, scrutinize how urban planning policies can also hurt other areas.
Urban growth boundaries are one policy idea that deserves reconsideration, argues Mercatus scholar Emily Hamilton.
What Are Urban Growth Boundaries?
An urban growth boundary (UGB) is a growth management rule that designates what areas can and cannot be developed around a city center. Essentially, planners create an invisible boundary around a metropolitan area that

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How States Can Improve Internet Access

January 30, 2019

This is the second installment in a multi-part series identifying policy reform opportunities that could improve the quality of life for rural Americans.
There is no doubt that technology access is vital to participation in the modern economy. Unfortunately, too many remote areas still lag behind in communications technology adoption, shutting them out from opportunities and quality of life improvements. State policymakers seeking to help rural constituencies should, therefore, consider reforms that improve telecom access.
It is true that much telecom policy is set at the federal level by the FCC. But there is much that state policymakers can do to improve rural telecom access. Here are few state level policy ideas to help expand rural telecom access, drawn from Mercatus publications.

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